Thread by @myfinology

We all do SIP in Mutual Funds kyuki vo sahi hai!

But should we consider SIPs in stocks? 🤔

Let’s find out.⤵️

#stocks #personalfinance #StockMarketindia

What is Stock SIP?

Stock SIP is a simple way to invest in equity market by buying stocks in a systematic amount/quantity on a periodic basis (weekly, monthly, etc.)

What are the Benefits?

⏩In the long run, systematic investment plans vs market-timed investments yield similar returns with negligible difference in most cases.

Additionally, it also reduces the price of volatility risk.

This option also creates a Discipline.

SIP payments are automatically deducted from your account and the shares get credited to your Demat.

But there're few limitations as well :

❌ Picking the right share
❌ Valuations of the company matter
❌ Finding the right Exit point

One may argue that doing SIP in NIFTY 50 stocks would have rewarded U handsomely but in reality there are very less chances that U'll end up picking stocks that outperform the market

Even if you have picked a right stock, the time of entry /valuation matters a lot!

Between 1999 to 2010, the share price of HUL had hardly moved, giving negligible/negative returns to the shareholders.

One top reason of this was it's valuation!

SIP is a great tool but for a diversified instruments like Mutual funds.

SIP in stocks, might not offer the diversity on its own.

You have to create a diversified basket of stocks to mitigate the volatility risk!

Also, Stock investments need timely review. You have to be aware of any news around the stocks , its financial performance, industry dynamics etc.

If u have expertise to understand business dynamics, u can consider stock SIPs

If u are beginner, it's better to stick to MF SIPs!

For our recommendations of quality stocks, visit Recipe.finology.in 👇

- Right entry Price
- Regular Update
- Sell Alert
- Research Report